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                                                      Order Code 94-27




                  CRS Report for Congress
                                      Received through the CRS Web




       Social Security: Brief Facts and Statistics




                                       Updated January 26, 2006




                                                       Gary Sidor
                                   Research Information Specialist
                                      Knowledge Services Group




Congressional Research Service ~ The Library of Congress
          Social Security: Brief Facts and Statistics

Summary
     This document provides brief facts and statistics about Social Security that are
frequently requested by Members of Congress and their staffs. It includes
information about Social Security taxes and benefits, the program's impact on
recipients' incomes, federal tax receipts, federal spending and the economy, and
administrative information.
Contents
Recipient Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
    Recipients By Trust Fund and Eligibility Status . . . . . . . . . . . . . . . . . . . . . . 2
    Recipients by State and Other Location . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Tax Facts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
    Workers Exempt From the Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
    Social Security Taxpayers in 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
    Social Security Tax Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
    How the Tax Rates Are Divided . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
    How Much Earnings Are Taxable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
    Annual OASDI and HI Tax Payments in 2004 . . . . . . . . . . . . . . . . . . . . . . . 8
    Historical Level of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
    Social Security Taxpayers Per Recipient . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Benefit Facts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
    Benefit Formula . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
    Quarters of Coverage (QCs) Required for Eligibility . . . . . . . . . . . . . . . . . 11
    Minimum Ages To Receive Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
    Ages At Which Persons Receive Full Retirement Benefits . . . . . . . . . . . . . 13
    Average Monthly Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
    Social Security Benefit Increases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
    Initial Monthly Benefits for Workers Retiring in 2005 . . . . . . . . . . . . . . . . 17
    New Benefit Awards as Percent of Final Year's Earnings . . . . . . . . . . . . . 18
    Benefit Reductions and Offsets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
    Maximum Monthly Earnings From Work Permitted for Disability
          Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
    How Long It Takes To Get Your Taxes Back . . . . . . . . . . . . . . . . . . . . . . . 20
    Social Security Benefits May Be Partially Taxable . . . . . . . . . . . . . . . . . . . 20

Economic Facts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
    Income of Social Security Recipients . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
    Social Security's and Medicare's Costs as Percent of Federal
         Budget, FY2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
    Social Security and Medicare Spending as Percent of Gross Domestic
         Product (GDP) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
    Financial Status of Social Security Trust Funds . . . . . . . . . . . . . . . . . . . . . 25

Administrative Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
   Offices, Employees, and Administrative Costs . . . . . . . . . . . . . . . . . . . . . . 27

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
    Sources for Information in this Document . . . . . . . . . . . . . . . . . . . . . . . . . . 28
    Other References for Program Descriptions . . . . . . . . . . . . . . . . . . . . . . . . 28
    Benefit Facts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
    Tax Facts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
    Economic Facts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
List of Figures
Figure 1. Ratio of Covered Workers to Beneficiaries . . . . . . . . . . . . . . . . . . . . . 10
Figure 2. Cost-of-Living Adjustments Since 1975 . . . . . . . . . . . . . . . . . . . . . . . 16
Figure 3. Historical Cost-of-Living Adjustments . . . . . . . . . . . . . . . . . . . . . . . . 17
Figure 4. Proportion of Income of Single Beneficiaries
     Aged 65 and Older . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Figure 5. Reliance of the Age 65+ on Social Security . . . . . . . . . . . . . . . . . . . . . 24
Figure 6. Balance of the Social Security Trust Funds . . . . . . . . . . . . . . . . . . . . . 26


List of Tables
Table 1. Recipients, By Selected Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Table 2. Where Recipients Live . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Table 3. Social Security Taxpayers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Table 4. Social Security Tax Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Table 5. FICA and SECA Tax Rates Fund Both Social Security
    and Medicare Hospital Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Table 6. Maximum Earnings Taxable by FICA and SECA . . . . . . . . . . . . . . . . . 7
Table 7. 2004 Social Security Tax Payments, Selected Work Histories . . . . . . . 8
Table 8. Social Security Tax Rates, Selected Years . . . . . . . . . . . . . . . . . . . . . . . 9
Table 9. Amount of FICA or SECA Tax Paid, Selected Wage Histories
    and Years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Table 10. Ratio of Covered Workers to Beneficiaries . . . . . . . . . . . . . . . . . . . . . 10
Table 11. Quarters of Coverage, Selected Facts . . . . . . . . . . . . . . . . . . . . . . . . . 12
Table 12. Age Restrictions for OASDI Benefits . . . . . . . . . . . . . . . . . . . . . . . . . 12
Table 13. Full Retirement Age Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Table 14. Average Monthly Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Table 15. Historical Cost-of-Living Adjustments . . . . . . . . . . . . . . . . . . . . . . . . 15
Table 16. New Benefit Awards to Retired Workers in 2005 . . . . . . . . . . . . . . . 17
Table 17. Initial Retirement Benefits as a Percent of Earnings . . . . . . . . . . . . . 18
Table 18. Earnings Test and Other Benefit Reductions . . . . . . . . . . . . . . . . . . . 19
Table 19. Substantial Gainful Activity Levels . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Table 20. Expected Payback Times (in years)*, Selected Earnings Histories . . 20
Table 21. A Lower Portion of Taxable Benefits . . . . . . . . . . . . . . . . . . . . . . . . . 21
Table 22. A Higher Portion of Taxable Benefits . . . . . . . . . . . . . . . . . . . . . . . . 21
Table 23. Distribution of Beneficiaries and Benefits, By Income Band . . . . . . . 22
Table 24. Aged Income Sources and Poverty Status . . . . . . . . . . . . . . . . . . . . . 23
Table 25. The Role of Social Security and Medicare in the Federal Budget,
    FY2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Table 26. Social Security and Medicare Spending as a Percent of GDP . . . . . . 25
Table 27. Various Performance Measures of the Trust Funds . . . . . . . . . . . . . . 26
Table 28. Administrative Structure and Customer Service Contacts for SSA . . 27
  Social Security: Brief Facts and Statistics

     This document provides facts and statistics about Social Security that are
frequently requested by Members of Congress and their staffs. Its purpose is to
provide quick answers to basic questions about the program. It should not be treated
as a guide to Social Security. The reader is advised to consult other sources for
explanations of how eligibility and benefits are determined and how the program is
financed. Among them are the Social Security Administration's (SSA) website at
[http://www.ssa.gov] and the Congressional Research Service's (CRS) product line
of reports, issue briefs, and fact sheets on Social Security, accessible through the
CRS homepage at [http://www.crs.gov] (for congressional office users only). SSA
also issues numerous pamphlets on various aspects of the program as well as a
lengthy Handbook on Social Security. For other sources that provide data and basic
descriptive material, see the references listed at the end of this document.

     This document is updated periodically.
                                            CRS-2

                              Recipient Statistics
     The federal Old-Age, Survivors, and Disability Insurance (OASDI) programs
collectively make up the system commonly referred to as Social Security. Officially,
there are two separate programs, each of which is administered by the Social Security
Administration (SSA) and managed by the operations of its own trust fund. The Old-
Age and Survivors Insurance (OASI) program and the Disability Insurance (DI)
program each disburse benefits to eligible retired or disabled workers and their
dependents, who have been covered by payroll contributions.

Recipients By Trust Fund and Eligibility Status
      Benefit payments are disbursed by the relevant trust fund. Retired workers and
their eligible dependent family members, as well as the dependent family members
of deceased workers, receive benefits from the Old-Age and Survivors Insurance trust
fund. Disabled workers and their eligible dependent family members receive benefits
from the Disability Insurance trust fund. Table 1 breaks down recipients by trust
fund, by entitlement, and by age.

               Table 1. Recipients, By Selected Indicators

       Recipients (as of December 2005)                 48.4 million       100.0%
        Old-Age and Survivors Insurance                    40.1 million    82.8%
        Disability Insurance                                8.3 million    17.2%
        Entitled on their own work records                37.0 million     76.4%
        Entitled as dependents                             11.5 million    23.7%
         -- Widow(er)s & surviving parents                 (4.7 million)   (9.8%)
         -- Wives and husbands                             (2.7 million)   (5.5%)
         -- Young children & adults disabled
        since childhood                                    (4.0 million)   (8.3%)
         Age 65 or older                                   34.0 million    70.2%
         Under age 65                                      13.6 million    29.8%

Source: Social Security Administration (SSA), Office of the Actuary.

Note: Totals may not equal the sums of rounded components.
                                       CRS-3

Recipients by State and Other Location
     Social Security benefits are paid to eligible individuals in all fifty states, the
U.S. outlying areas, and foreign countries. Table 2 illustrates the distribution of
recipients in December 2003 by where they live.

                        Table 2. Where Recipients Live

            State of other location       Number             % of Total
          Total                             47,038,391        100.0%
          Alabama                              867,601          1.8%
          Alaska                                60,860          0.1%
          Arizona                              863,874          1.8%
          Arkansas                             543,727          1.2%
          California                         4,363,657          9.3%
          Colorado                             557,253          1.2%
          Connecticut                          582,877          1.2%
          Delaware                             141,488          0.3%
          District of Columbia                  72,209          0.2%
          Florida                            3,330,425          7.1%
          Georgia                            1,168,095          2.5%
          Hawaii                               194,019          0.4%
          Idaho                                211,528          0.4%
          Illinois                           1,867,671          4.0%
          Indiana                            1,032,417          2.2%
          Iowa                                 546,065          1.2%
          Kansas                               443,706          0.9%
          Kentucky                             768,861          1.6%
          Louisiana                            731,511          1.6%
          Maine                                262,533          0.6%
          Maryland                             751,359          1.6%
          Massachusetts                      1,061,851          2.3%
          Michigan                           1,699,384          3.6%
          Minnesota                            765,228          1.6%
          Mississippi                          533,375          1.1%
          Missouri                           1,033,886          2.2%
          Montana                              163,659          0.3%
          Nebraska                             287,891          0.6%
          Nevada                               327,319          0.7%
          New Hampshire                        211,499          0.4%
          New Jersey                         1,363,838          2.9%
          New Mexico                           294,669          0.6%
          New York                           3,035,697          6.5%
          North Carolina                     1,436,124          3.1%
          North Dakota                         114,047          0.2%
                                 CRS-4

  State of other location           Number                  % of Total
Ohio                                   1,932,026              4.1%
Oklahoma                                 613,515              1.3%
Oregon                                   591,461              1.3%
Pennsylvania                           2,386,426              5.1%
Rhode Island                             192,662              0.4%
South Carolina                           735,084              1.6%
South Dakota                             137,880              0.3%
Tennessee                              1,041,360              2.2%
Texas                                  2,792,148              5.9%
Utah                                     256,551              0.5%
Vermont                                  108,248              0.2%
Virginia                               1,093,695              2.3%
Washington                               890,466              1.9%
West Virginia                            405,444              0.9%
Wisconsin                                928,505              2.0%
Wyoming                                   78,745              0.2%
Outlying Areas:
  American Samoa                            5,425               *
  Guam                                    11,245                *
  No. Mariana Islands                       2,157               *
  Puerto Rico                            702,675              1.5%
  Virgin Islands                          15,024
Foreign Countries                        427,446              0.9%

Source: Social Security Administration, Office of Policy.

Note: Totals may not equal the sums of rounded components.

* = less than 0.1%
                                       CRS-5

                                   Tax Facts
     The Social Security trust funds are financed by payroll taxes on covered
earnings. Being "covered" by Social Security means that a worker is employed in a
job or is self-employed and contributes a portion of his or her earnings to Social
Security. Workers not covered by Social Security are either covered by a similar
eligible contributory system offered by their employers outside of Social Security, do
not have high enough earnings for mandatory participation, or have another special
exemption. The type of workers exempt from coverage are provided below.

Workers Exempt From the Tax
     !   State and local government workers participating in alternative
         retirement systems (HI tax is mandatory for workers hired since
         April 1, 1986).
     !   Election workers earning $1,300 or less a year (in 2006).
     !   Career federal employees hired before 1984 who did not choose
         Social Security coverage (HI tax is mandatory for all federal
         workers);
     !   College students working at their academic institutions.
     !   Ministers who choose not to be covered, and certain religious sects.
     !   Household workers earning less than $1,500 a year (in 2006), and
         those under age 18 for whom household work is not their principal
         occupation.
     !   Self-employed workers with annual net earnings below $400.

Social Security Taxpayers in 2003
      Covered workers contribute to Social Security by paying payroll taxes on their
earnings. Wage and salaried workers often have their contributions deducted from
each paycheck they receive, while self-employed must report earnings regularly with
the Social Security Administration. Table 3 provides the number of covered workers
that contribute to the Social Security system, as of December 2003. The total number
of taxpayers is much lower than the sum of the two coverage groups because
approximately six million individuals overlap coverage and engage separately in both
wage and salaried work as well as in self-employed work.
                                            CRS-6

                      Table 3. Social Security Taxpayers

           Taxpayers, by coverage group                                Number
 Number of wage and salaried taxpayers                                          145.1 million
 Number of self-employed taxpayers                                               15.1 million
 Total taxpayers*                                                               154.3 million

Source: Social Security Administration, Office of Policy.

* Includes people who are both self-employed and wage or salaried employees.

Social Security Tax Rates
     Covered wage and salaried workers contribute 7.65% of their earnings below
the taxable maximum earnings threshold (explained below) to the Social Security
system. Employers of covered workers contribute to the system an additional 7.65%
of the earnings of each employee. The payroll taxes levied on workers and their
employers are called FICA taxes, after the legislation that created them, the Federal
Insurance Contribution Act.

     Self-employed workers contribute roughly 15.30% of their net earnings to the
system. The payroll tax levied on the self-employed are known as SECA taxes, for
the Self-Employed Contribution Act. FICA and SECA tax rates are displayed in
Table 4. On paper, it appears that the self-employed are subject to a tax rate that is
double that of a wage and salaried worker, essentially equaling both the employee
and employer FICA portions. However, the self-employed receive two breaks that
are not offered to wage and salaried workers and their employers.

      The first break is that not all of a self-employed worker's earnings are subject
to SECA taxes. Only 92.35% of net earnings are subject to SECA taxes (meaning
that 7.65% is exempt). The second break is that one-half of the tax payments made
in the form of SECA contributions are deductible for income tax purposes.

                      Table 4. Social Security Tax Rates

           Type of employment and tax                             % of Earnings
 FICA rate is paid by employee and employer:                          7.65% each
 SECA rate is paid by self-employed:                                   15.30%*

So urce: Social Security Administration                website,   Electronic     Fact    Sheet
[http://www.ssa.gov/pubs/10003.html].

* = The self-employed now compute the tax using only 92.35% of net earnings, and one-half of the
tax so computed is deductible for income tax purposes.
                                             CRS-7

How the Tax Rates Are Divided
     Portions of both the FICA and SECA tax rates are dedicated to fund both Social
Security and the Medicare Hospital Insurance (HI) program, also known as Medicare
"Part A." Of the 7.65% FICA tax rate paid by both employers and employees, 6.2
percentage points go to OASDI, and the remaining 1.45% of the tax is used to fund
HI. Similarly, of the 15.3% SECA rate, 12.4 percentage points is dedicated to
OASDI, while 2.9% goes to HI. Table 5 provides a detail of the breakdown.

 Table 5. FICA and SECA Tax Rates Fund Both Social Security
               and Medicare Hospital Insurance

                                                       FICA rate (employee
                                                       and employer, each)       SECA rate
 Old-age, survivors, and disability insurance
                                                             6.20%                 12.4%
 (OASDI)
 Hospital insurance (HI)                                     1.45%                  2.9%
 Total (OASDI and HI)                                        7.65%                 15.3%

Source: Social Security Administration website, Electronic Fact Sheet [http://www.ssa.gov/
pubs/10003.html].

How Much Earnings Are Taxable
     Covered workers contribute the proper percentage of their earnings by either the
FICA or SECA tax. However, not all earnings are subject to FICA and SECA taxes.
There is a maximum taxable earnings threshold, which rises each year with overall
wage growth. Earnings above the cap are not subject to the OASDI portion of the
FICA and SECA taxes. The earnings above the cap, however, are subject to the HI-
dedicated portion of the FICA and SECA taxes. The wage cap is effective for both
the employer and employee OASDI-dedicated portions of the FICA tax. Recent
wage cap limits are shown in Table 6. The Social Security Administration's Office
of Policy estimates that 94.6% of covered workers had earnings below the maximum
taxable threshold in 2002, the latest year for which data is available.

      Table 6. Maximum Earnings Taxable by FICA and SECA

                                                  2004           2005              2006
 Maximum taxable for OASDI:*                    $87,900         $90,000          $94,200
 Maximum taxable for HI:                        No limit        No limit         No limit

Source: Social Security Administration website, Electronic Fact Sheet [http://www.ssa.gov/pubs/
10003.html].

* Adjusted yearly to reflect the growth of average wages.
                                             CRS-8

Annual OASDI and HI Tax Payments in 2004
      Self-employed workers are subject to the payroll tax rate, which amounts to the
sum of both the employer and employee shares of the FICA tax rate. However, the
self-employed benefit from two breaks that reduce their overall tax burden. First,
self-employed workers are only required to make 92.35% of their net earnings
subject to the SECA tax rate. Wage and salaried employees have the FICA tax rate
applied to all (100%) of their earnings.

        Second, self-employed workers can deduct one-half of their SECA tax
payments from their income taxes. For example, if a hypothetical self-employed
person had $35,057 in net earnings, an amount equivalent to the average wage earner
in the economy, they would pay SECA taxes on $32,375 of those earnings (92.35%
of $35,057). When the 15.3% SECA tax rate is applied to $32,375, the result is a
SECA tax burden of $4,953. In computing the effect of the income tax deduction,
one-half of the $4,953 tax burden ($2,477) is used for calculation purposes.
Assuming that this hypothetical self-employed worker with $35,057 in net earnings
is in the 15% marginal income tax bracket, a $2,477 income tax deduction is going
to result in a tax savings of an additional $372 (15% of $2,477). The net real tax
burden in this example would be $4,582 -- instead of $4,953 without the income tax
deduction and $5,364 (15.3% of $35,057) without the income tax deduction and the
exemption from net earnings.

    These computations are included in Table 7 to illustrate the tax burdens of both
wage and salary and self-employed workers with various earnings histories.

   Table 7. 2004 Social Security Tax Payments, Selected Work
                           Histories

      Earnings level                                        FICA**               SECA***
 Minimum wage                       ($10,712/year)                  $819                 $1,438
 Average                            ($35,057/year)                $2,682                 $4,582
 Maximum                            ($87,900/year)                $6,724                $10,557

Source: Estimates made by CRS from data in the 2004 trustees' report. The average and maximum
earnings levels are linked to real average increases in wages. The minimum wage annual earnings
level is obtained by multiplying the federal minimum wage for most workers, $5.15 per hour, by 2080
hours worked (40 hours worked per week, for 52 calendar year weeks). A maximum earner is
someone who earns the maximum wage subject to OASDI taxes ($87,900 in 2004).

** Employee share only.

*** Figures are net of federal income tax adjustments. Workers earning the minimum or the average
wage are assumed to be in the 10% and 15% marginal tax brackets, respectively. Maximum-wage
earners are assumed to be in the 30% marginal tax bracket.

Historical Level of Taxes
     The FICA and SECA tax rates have been increased several times since the
beginning of the Social Security program. SECA taxes were not levied until after
                                            CRS-9

1950, when coverage began for the first categories of self-employed workers. The
evolution of FICA and SECA tax rates and tax payments are shown in Table 8 and
Table 9.

          Table 8. Social Security Tax Rates, Selected Years

                            FICAa           SECA            Maximum taxable earningsb
         1940               1.00%               --                      $3,000
         1950                1.50               --                       3,000
         1960                3.00           4.50%                        4,800
         1970                4.80            6.90                        7,800
         1980                6.13               8.10                    25,900
         1990                7.65              15.30                    51,300
         2000                7.65              15.30        76,200 (OASDI) (No limit HI)
         2006                7.65              15.30        94,200 (OASDI) (No limit HI)

Source: Social Security Administration, Office of the Actuary.

   Table 9. Amount of FICA or SECA Tax Paid, Selected Wage
                      Histories and Years

                                      Average earner                Maximum earner
                                    FICAa            SECA         FICAa            SECA
            1940                      $ 12                 --       $ 30                 --
            1950                          38               --           45               --
            1960                         120           $ 180           144           $ 216
            1970                         297              427          374              538
            1980                         767            1,014        1,588            2,098
            1990                       1,609           2,748c        3,924            6,234c
            2004                       2,682           4,539c        6,724           10,557c

Source: Estimates made by Congressional Research Service (CRS) from data in the 2004 OASDI
trustees' report.

a. Employee share only for the FICA column. An average earner is someone who earned average
     wages throughout his or her working years (average wages are estimated for 2003). A maximum
     earner is someone who always earned the maximum wage subject to OASDI taxes ($87,900 in
     2004).
b. Maximum taxable earnings were the same for OASDI and HI through 1990.
c. Figures are net of federal income tax adjustments. In 1990, the average and maximum wage
     workers were assumed to be in the 15% and 28% marginal tax brackets, respectively. In 2004,
     they are assumed to be in the 15% and 30% marginal tax brackets, respectively.

Social Security Taxpayers Per Recipient
      Much of the expected long-term financial strain on the Social Security system's
ability to disburse benefits to future benefits lies in demographics. In the early years
of the system, there were more than ten covered workers contributing with payroll
                                        CRS-10

taxes for every one person drawing benefits. Presently, there is barely more than
three covered workers for every beneficiary, and the Social Security trustees project
that this ratio will eventually fall to less than 2 to 1. Table 10 and Figure 1 illustrate
how this ratio has changed drastically over time.

         Table 10. Ratio of Covered Workers to Beneficiaries

                      Covered workers      Beneficiaries (in   Ratio of covered workers
                       (in thousands)        thousands)             per beneficiary
 1950                      48,280                2,930                 16.5 to 1
 1960                      72,530               14,262                  5.1 to 1
 1970                      93,090               25,186                  3.7 to 1
 1980                      113,649              35,118                  3.2 to 1
 1990                      133,672              39,470                  3.4 to 1
 2000                      154,732              45,166                  3.4 to 1
 2005 (estimated)          158,718              47,993                  3.3 to 1
 2010 (projected)          166,717              52,604                  3.2 to 1
 2020 (projected)          176,049              67,977                  2.6 to 1
 2030 (projected)          181,110              83,524                  2.2 to 1
 2040 (projected)          186,581              91,077                  2.0 to 1
 2050 (projected)          191,869              95,340                  2.0 to 1
 2060 (projected)          196,467             100,389                  2.0 to 1
 2070 (projected)          200,774             105,828                  1.9 to 1

Source: 2005 OASDI trustees report.

           Figure 1. Ratio of Covered Workers to Beneficiaries
           Covered Workers Per Beneficiary
    18
    16
    14
    12
    10
     8
     6
     4
     2
     0
         1950 1960 1970 1980 1990 2000 2005 2010 2020 2030 2040 2050 2060 2070


Source: Chart prepared by Congressional Research Service (CRS) from data in the 2005 OASDI
trustees report.
                                      CRS-11

                                Benefit Facts
Benefit Formula
     The Social Security benefit computation formula is progressive, as it uses "bend
points" to return higher percentages of a lower-wage worker's lifetime indexed
earnings, computed on a monthly basis. For 2006, the bend points used in the benefit
formula are $656 and $3,955, respectively, and are increased annually based on
average wage growth.

     If all or most of a worker's indexed earnings fall under the first or second bend
point, they will see a higher replacement rate of average monthly earnings as
compared to monthly Social Security benefits. The more earnings a worker may have
beyond the second bend point, the lower the net return that worker will see in
augmenting their Social Security benefit.

For basic benefit (or primary insurance amount):*

     !   90% of first $656 of AIME,** plus
     !   32% of AIME over $656 through $3,955, plus
     !   15% of AIME over $3,955

For maximum family benefit:

     !   150% of first $838 of basic benefit, plus
     !   272% of basic benefit over $838 through $1,210, plus
     !   134% of basic benefit over $1,210 through $1,578, plus
     !   175% of basic benefit over $1,578

* Without adjustment for early or delayed retirement or other factors.
** AIME = average indexed monthly earnings.

Quarters of Coverage (QCs) Required for Eligibility
     To qualify for retired or disabled worker benefits, an individual must
accumulate the required number of quarters of coverage. A worker must have
covered earnings equal to or exceeding the prescribed amount ($970 in 2006) in a
calendar quarter to earn a quarter of coverage. While a minimum of 40 covered
quarters must be achieved to be "vested" in the system to receive retirement benefits
in most cases, disabled worker benefits may be granted with as few as six quarters
of coverage, if the onset of the disabling condition or event occurred while the
worker was at young enough age. The number of quarters of coverage needed under
different circumstances is illustrated in Table 11.
                                            CRS-12

            Table 11. Quarters of Coverage, Selected Facts

                                                                           2005          2006
 Annual covered earnings needed to obtain one QC*                             $920         $970
 Maximum QCs that can be credited in any year                                     4            4
 QCs needed for most retirement or survivor benefits**                           40           40
 QCs needed for disability benefits**                                            40           40
   (with 20 earned during 40-quarter period before disability began)
 Minimum QCs needed for survivor or disability benefits                           6             6

Source: Social Security Administration, Office of Policy.

* Adjusted yearly to reflect the growth of average wages.
** Fewer QCs may be required in some survivor and disability cases.

Minimum Ages To Receive Benefits
     In addition to covered earnings and length of coverage employment, receipt of
many OASDI benefits is conditional with age. Table 12 shows the earliest eligibility
ages (EEA) and maximum eligibility age that qualify or disqualify a worker or
dependent for benefit payments. Retired worker, spousal, and widow(er) benefits all
have a "full" or "normal" eligibility age (FRA or NRA), in which benefits are not
penalized for early receipt. In cases where an eligible claimant files for benefits
between the earliest eligibility age and the normal retirement age, the amount of the
monthly benefit is subject to an actuarial reduction, with the reduction being lower
the closer the claimant is to reaching the normal eligibility age.

             Table 12. Age Restrictions for OASDI Benefits

          Type of benefit claimant                                Age restriction
 For retired worker (earliest eligibility age)                           62
 For widow/widower                                                       60
 For disabled widow/widower                                              50
 For mother/father caring for child under
                                                                      any age
 age 16
 For child                                           under age 18 (or 19, if in high school)
 For disabled worker                                         any age up to FRA*

Source: Social Security Administration, Office of the Actuary.

* The "full retirement age" or age at which benefits are not reduced for retiring "early." (See the
following table).
                                           CRS-13

Ages At Which Persons Receive Full Retirement Benefits
      For purposes of qualifying for spousal or widow(er)'s benefits, the full or
normal retirement age (known as both the FRA or NRA), has little to do with
retirement, as claims to these benefits is not conditional on a covered work history,
or more specifically, the ceasing of work. In fact, the FRA is misleading to workers,
too, because leaving the workforce is not a condition for retirement benefit eligibility.
Rather, the FRA is simply a qualifying age threshold.

      For many years, the Social Security full or normal retirement age remained
constant at 65 years. In 1983, however, a comprehensive Social Security reform
package that included many programmatic changes altered the law to gradually phase
in an increase of the normal retirement age. Starting with those born in 1938, the full
retirement age will be higher than age 65, depending on your year of birth. The
highest the full retirement age is scheduled to hit is age 67, affecting those born in
1960 and later. Table 13 provides the full schedule of current law increases
scheduled to take effect.

                  Table 13. Full Retirement Age Schedule

           For retired worker and spouse                         Full retirement age
        born before 1938                                   65
        born 1938                                          65 and 2 months
        born 1939                                          65 and 4 months
        born 1940                                          65 and 6 months
        born 1941                                          65 and 8 months
        born 1942                                          65 and 10 months
        born 1943-1954                                     66
        born 1955                                          66 and 2 months
        born 1956                                          66 and 4 months
        born 1957                                          66 and 6 months
        born 1958                                          66 and 8 months
        born 1959                                          66 and 10 months
        born 1960 and later                                67

Source: Social Security Administration, Office of the Actuary.

Average Monthly Benefits
     OASDI benefits are paid to retired and disabled workers, as well as to their
eligible dependent family members. The benefit formula illustrated above is used to
compute primary insurance amounts (PIAs) for eligible retired or disabled workers,
but benefit amounts paid to dependents are determined by applying the relevant
percentage amount of the worker they are dependent upon. Typically, eligible
spouses and children of workers can receive a monthly amount up to 50% of the
worker's primary insurance amount. Surviving spouses may be eligible for a
monthly amount up to 100% of the worker's PIA. Factors that may reduce these
                                           CRS-14

maximum percentage amounts include early eligibility, a dependent's own work
record and subsequent benefit eligibility based on that work record, remarriage, and
other factors. Table 14 provides average monthly benefit amounts for selected
beneficiary categories before and after the application of the 2006 annual cost-of-
living (COLA) automatic benefit increase (more on COLAs below).

                     Table 14. Average Monthly Benefits

                                                     Monthly payment for January 2006
                                                       Before COLA          After COLA*
 For all retired workers                                        $963                $1,002
 For all disabled workers                                        901                   938
 For retired worker and spouse                                      1,583            1,648
 For aged widow(er) alone                                             929              967
 For widowed mother/father and two children                         1,989            2,071
 For disabled worker, spouse, and child(ren)                        1,509            1,571

Source: Social Security Administration, Office of the Actuary.

* Includes January 2006 cost-of-living adjustment (COLA) of 4.1%.

Social Security Benefit Increases
     Social Security benefits are inflation-protected by the application of an
automatic annual cost-of-living adjustment (COLA). The percentage applied to all
beneficiaries is compiled from economic indicators that track inflation of prices on
goods and services over the previous year. The COLA is applied so beneficiaries do
not lose their purchasing power over time as they would if benefits were held
constant while prices of goods and services generally increased.

     Prior to 1975, COLAs were applied sporadically to increase benefit levels to
keep pace with inflation. Starting in 1975, COLAs have been applied annually, with
the exception being when their effective date was switched from July to January, and
there was no COLA applied in the months between July 1982 and January 1984.
Table 15 and Figure 2 illustrate the full history of benefit level increases, while
Figure 3, for a different perspective, focuses on recent COLAs.
                    CRS-15

Table 15. Historical Cost-of-Living Adjustments

 Year of increase              Percent of increase
  January 2006                        4.1%
  January 2005                        2.7%
  January 2004                        2.1%
  January 2003                        1.4%
  January 2002                        2.6%
  January 2001                        3.5%
  January 2000                        2.5%*
  January 1999                        1.3%
  January 1998                        2.1%
  January 1997                        2.9%
  January 1996                        2.6%
  January 1995                        2.8%
  January 1994                        2.6%
  January 1993                        3.0%
  January 1992                        3.7%
  January 1991                        5.4%
  January 1990                        4.7%
  January 1989                        4.0%
  January 1988                        4.2%
  January 1987                        1.3%
  January 1986                        3.1%
  January 1985                        3.5%
  January 1984                        3.5%
    July 1982                         7.4%
    July 1981                        11.2%
    July 1980                        14.3%
    July 1979                         9.9%
    July 1978                         6.5%
                                           CRS-16

              Year of increase                               Percent of increase
                  July 1977                                           5.9%
                  July 1976                                           6.4%
                 July 1975**                                          8.0%
             April-July 1974***                                      11.0%
                October 1972                                         20.0%
               February 1971                                         10.0%
               February 1970                                         15.0%
                 March 1968                                          13.0%
               February 1965                                          7.0%
               February 1959                                          7.0%
                October 1954                                         13.0%
                October 1952                                         12.5%
                October 1950                                         77.0%

Source: Social Security Administration, Office of the Actuary.

* As originally computed, the COLA payable in January 2000 was 2.4%. Later, it was corrected to
     2.5% under P.L. 106-554.
** Automatic cost-of-living adjustments (COLAs) began.
*** Provided in two steps.

              Figure 2. Cost-of-Living Adjustments Since 1975




Source: Chart prepared by the Congressional Research Service (CRS) from data obtained from Social
Security Administration, Office of the Actuary.
                                            CRS-17


                Figure 3. Historical Cost-of-Living Adjustments

         Cost of Living Adjustment (% Change of Benefit Increase)
   90
   80
   70
   60
   50
   40
   30
   20
   10
    0
        1950   1965     1972    1977     1981     1986      1990    1994     1998   2002




Source: Chart prepared by the Congressional Research Service (CRS) from data obtained from Social
Security Administration, Office of the Actuary.

Initial Monthly Benefits for Workers Retiring in 2005
      Table 16 shows what workers with different earnings histories would receive
in monthly benefits when retiring in 2005. The disparity in benefit amounts in the
two columns is affected by the fact that a worker born in 1940 and turning 65 during
the 2005 must wait until six months past his/her month of birth before receiving
unreduced benefits at the full retirement age. See Table 13 for the schedule of full
retirement ages.

     Table 16. New Benefit Awards to Retired Workers in 2005

                                                                           At the normal
                                                At age 65                  retirement age
 Low-wage earner                                 $ 750                         $ 775
 Average-wage earner                             1,236                         1,278
 Maximum-wage earner                             1,877                         1,940

Source: 2005 OASDI trustees' report.

Note: A low-wage earner is someone who always earned approximately 45% of the national average
wage. An average-wage earner is someone who always earned the average wage. A maximum-wage
earner is someone who always earned the maximum amount subject to the Social Security tax.
                                          CRS-18

New Benefit Awards as Percent of Final Year's Earnings
(new retiree age 65 in 2005; figures based on assumptions of 2005 trustees' report)

     The progressive nature of the benefit computation formula, explained above,
provides lower earning workers with a higher replacement rate of benefits as
compared to earnings. The expected replacement rates of new retirees in 2005, with
different earnings histories and benefit election at age 65, are shown in Table 17.

  Table 17. Initial Retirement Benefits as a Percent of Earnings

                                                     Percent of benefits to earnings
 Low-wage earner                                                    57%
 Average-wage earner                                                42%
 Maximum-wage earner                                                30%

Source: 2005 OASDI trustees' report

Note: A low-wage earner is someone who always earned approximately 45% of the national average
wage. An average-wage earner is someone who always earned the average wage. A maximum-wage
earner is someone who always earned the maximum amount subject to the Social Security tax.

Benefit Reductions and Offsets
      While election for retirement benefits is not conditional on leaving the work
force, earnings from work can reduce monthly benefits that are received before the
full retirement age. In years preceeding the year in which one will reach the full
retirement age, benefits are reduced $1 for every $2 of earnings over the base
earnings test annual exemption amount ($12,480 in 2006). In the calendar year in
which one will reach the full retirement age, benefits are reduced $1 for every $3 of
earnings over a much higher second earnings test exemption amount ($33,240 in
2006). After reaching the full retirement age, beneficiaries are not subject to any
benefit reductions due to earnings. Table 18 provides the thresholds for the earnings
test, as well as other basic benefit reductions or offsets.
                                           CRS-19

       Table 18. Earnings Test and Other Benefit Reductions

                                                                                Reduction rate
   Earnings test (reduction in                                                   for earnings
 benefits on account of earnings         2005 exempt          2006 exempt       above exempt
           from work)                      amounts              amounts            amounts
 Before year in which worker
                                                $12,000             $12,480               50.0%
 reaches full retirement age
 For months before birthday in
 year in which worker attains full              $31,800             $33,240               33.3%
 retirement age
 Month in which worker reaches
                                            all earnings         all earnings              none
 full retirement age and later
 Spousal dual entitlement limitation: $1 reduction in spousal benefits for each $1 of
 benefits earned as a worker.

 Government pension offset: $0.662/3 reduction in spousal benefits for each $1 of
 pension received from government employment not covered by Social Security.
 Windfall reduction: 40% factor is used as first step of benefit formula (instead of 90%),
 if worker receives a pension from government employment not covered by Social
 Security and has less than 21 years of substantial Social Security coverage (factor is
 larger if worker has 21 or more years of substantial coverage). Reduction cannot exceed
 50% of the government pension.

Source: Social Security Administration, Office of Policy.

Maximum Monthly Earnings From Work Permitted for
Disability Benefits
     The primary indicator in determining one's eligibility to receive Social Security
disability benefits is one's ability to partake in gainful employment. There are two
earnings thresholds that are applied to determine if a disability beneficiary or
claimant is gainfully employed or has the ability to be gainfully employed. They are
known as the monthly "substantial gainful activity" (SGA) levels.

    In 2006, those beneficiaries who disabling condition is blindness, the level of
SGA before loss of eligibility is $1,450 per month. For all other disabled
beneficiaries, the monthly SGA amount is $860. These amounts are provided in
Table 19.

              Table 19. Substantial Gainful Activity Levels

                                                            2005                  2006
 Non-blind disabled                                         $830                  $860
 Blind disabled                                             1,380                 1,450
Source: Social Security Administration, Office of the Actuary.
*Adjusted yearly to reflect the growth of average wages.
                                              CRS-20

How Long It Takes To Get Your Taxes Back
     Similar to the fact that lower-wage workers receive a higher replacement rate
of benefits to earnings that higher paid workers, it also takes less time for lower-wage
workers to recoup the value of worker payroll tax contributions in monthly benefit
payments. Table 20 provides expected payback times of workers with varying wage
histories.

     Since spouses with no earnings histories are eligible for monthly benefits when
they meet certain factors such as age requirements, worker and spouse receiving
benefits simultaneously significantly reduces the expected time of recoupment of the
workers contributions.

      Table 20. Expected Payback Times (in years)*, Selected
                       Earnings Histories

                                                                    Employee/employer shares
                                  Employee share alone                     combined
                                              Worker                              Worker
                                  Worker     and spouse              Worker      and spouse
 Low-wage earner                        5.4           3.5                 12.0           7.5
 Average-wage earner                    7.5           4.8                 17.4          10.5
 Maximum-wage earner                  10.4            6.5                 25.7          14.8

Source: Estimates made by CRS from data obtained in the 2003 OASDI trustees report.

* Time it takes to recover retirement portion of the Social Security payroll tax with interest. Assumes
worker retired in January 2003 at age 65 after having worked steadily since age 21 (age 22 for
maximum-wage earner). A low-wage earner is someone who always earned approximately 45% of
the national average wage. A maximum-wage earner is someone who always earned the maximum
amount subject to the Social Security tax. Assumes the worker's spouse is also age 65. The
"retirement portion" of the tax is approximate since the law does not actually isolate the "old age"
portion. Medicare benefits and taxes are excluded from the figures. Interest assumed to be equal to
rates that accrue on government securities with four-year or longer maturities. (All figures based on
intermediate assumptions of the 2003 trustees' report.)

Social Security Benefits May Be Partially Taxable
    Table 21 and Table 22 provide examples of how the combination of Social
Security benefits and other income can subject different proportions of the Social
Security benefits to income taxes.

    Up to 50% of benefits are subject to federal income taxes if adjusted gross
income plus tax-free interest plus one-half of Social Security benefits is:

      !   Over $25,000, but not more than $34,000 for a single person
      !   Over $32,000, but not more than $44,000 for a married couple filing
          jointly
                                           CRS-21

             Table 21. A Lower Portion of Taxable Benefits

 Example #1:
    Single retiree's adjusted gross income                                            $23,000
    One-half of retiree's Social Security benefits                                     +4,000
                                                                                       +1,000
    Interest from tax-free municipals
    Total                                                                             $28,000
    Less: exempt amount                                                               -25,000
    Excess over $25,000                                                                $ 3,000
    Amount of taxable Social Security benefits (One-half of excess or one-
    half of benefits, whichever is lower)                                              $ 1,500

Source: Social Security Administration, Office of Policy, 2003 Annual Statistical Supplement.

    Up to 85% of benefits are subject to federal income taxes if adjusted gross
income plus tax-free interest plus one-half of Social Security benefits is:

     !   Over $34,000 for a single person
     !   Over $44,000 for a married couple filing jointly

             Table 22. A Higher Portion of Taxable Benefits

 Example #2:
           Single retiree's adjusted gross income                                     $32,000
           One-half of retiree's Social Security benefits                              +5,000
           Total                                                                       37,000
           Less: exempt amount                                                        -25,000
           Excess                                                                      12,000
           Taxable benefits based on income
            between $25,000 and $34,000                                                $4,500
            (lower of 50% of excess, 50% of benefits, or $4,500)
           Taxable benefits based on income above $34,000
           [($37,000 - $34,000) x 85%]                                                 $2,550
           Total benefits taxable (taxable portions as calculated above, or
           85% of benefits, if lower)                                                  $7,050

Source: Social Security Administration, Office of Policy, 2003 Annual Statistical Supplement.
                                                CRS-22

                                  Economic Facts
Income of Social Security Recipients
     Many Social Security beneficiaries rely on benefit payments to make up a
significant portion of their income. The incomes of many lower income beneficiary
families is largely dependent on Social Security payments, and for 40% of single
beneficiaries over age 65, Social Security payments make up 90% or more of the
individual's income.

     Table 23 shows distributions of beneficiaries and aggregate Social Security
benefit payments by income band. The lowest income band listed contains the
highest number of beneficiary families, yet receives only the third highest proportion
of benefit payments.

     Table 24 as well as Figure 4 and Figure 5 illustrate the magnitude to which
recipients rely on their monthly benefit payments.

Table 23. Distribution of Beneficiaries and Benefits, By Income
                             Band

                                                                 % of aggregate Social
 Annual level of individual or           % of recipients in     Security benefits paid to
        couple income*                    income band          recipients in income band
Less than $10,000                                       18.8%                       12.6%
$10,000-15,000                                          12.8%                       12.5%
$15,000-20,000                                          10.8%                       10.8%
$20,000-25,000                                            8.6%                       9.3%
$25,000-30,000                                            7.5%                       7.8%
$30,000-40,000                                          12.0%                       12.8%
$40,000-50,000                                            9.4%                       9.9%
$50,000-100,000                                         14.6%                       17.3%
Over $100,000                                             5.4%                       6.9%
All                                                    100.0%                      100.0%

Source: Congressional Budget Office (House Ways and Means Committee 2000 Greenbook).

Note: Distribution is estimated for Calendar Year 2000.

* Includes all cash income and capital gains.
                                          CRS-23

         Table 24. Aged Income Sources and Poverty Status

    Income of the population age 65 and older in 2000
                         derived from:                               Single      Married
 Social Security                                                       46%           34%
 Other retirement systems                                              18%           18%
 Interest, dividends, rents                                            19%           17%
 Earnings                                                              14%           29%
 Other                                                                  4%             2%
 Total                                                                100%          100%
 Percent of population age 65 and older in 2000:
 With incomes below poverty line                                        17%             5%
 With no income from Social Security                                    10%            10%
 With under 50% of income from Social Security                          29%            47%
 With 50% or more of income from Social Security                        71%            53%
 With 90% or more of income from Social Security                        40%            20%
 With 100% of income from Social Security                               26%            11%

Source: Social Security Administration, Office of Policy. Totals may not equal sums of rounded
components.
                                                              CRS-24

             Figure 4. Proportion of Income of Single Beneficiaries
                               Aged 65 and Older



                                     4%
              14%



                                                                                             S o c ia l S e c urit y
                                                                               45%           O t he r R e t ire m e n t S ys t e m s
                                                                                             In t e re s t , D iv ide n d s , R e n t s
                                                                                             E a rn ing s
 19%                                                                                         O t he r




                           18%


Source: Chart prepared by Congressional Research Service (CRS) from data obtained from SSA,
Office of Policy.

                   Figure 5. Reliance of the Age 65+ on Social Security
                                         P e rce n t o f t h e P o pu l a ti o n A g e 6 5 a n d O l de r

  Wit h 10 0 % o f In c o m e
                                                                    26%
  f ro m S o c ia l S e c u rit y

  Wit h 9 0 % o r M o re o f
  In c o m e f ro m S o c ia l                                                       40%
          S e c u rit y

 Wit h 5 0 % o f M o re o f
 In c o m e f ro m S o c ia l                                                                                               71%
         S e c u rit y

    Wit h Un d e r 5 0 % o f
   In c o m e f ro m S o c ia l                                         29%
           S e c u rit y

 Wit h N o In c o m e f ro m
                                                10%
     S o c ia l S e c u rit y


  Wit h In c o m e s B e lo w                            17%
   t h e P o v e rt y Lin e


                                    0%      10%         20%         30%          40%         50%            60%        70%         80%


Source: Chart prepared by Congressional Research Service (CRS) from data obtained from Social
Security Administration, Office of Policy.
                                       CRS-25

Social Security's and Medicare's Costs as Percent of Federal
Budget, FY2004
     Social Security and Medicare make up a significant portion of federal spending.
Table 25 shows that the two programs combined make up over one-fourth of federal
outlays.

    Table 25. The Role of Social Security and Medicare in the
                    Federal Budget, FY2004

                                        Estimated share of all federal outlays
 Social Security                                        21.4%
 Medicare                                                7.3%
 Combined                                               28.7%

Source: Office of Management and Budget (OMB), FY2006 Budget.

Social Security and Medicare Spending as Percent of Gross
Domestic Product (GDP)
    As a proportion of the overall economy is as measured by gross domestic
product (GDP), Social Security and Medicare combined spending will increase by
54% from 2004 to 2030. As Table 26 shows, in 2004 Social Security and Medicare
spending make up 5.83% of GDP. In 2030, it is projected that the two programs will
account for 8.95% of GDP.

 Table 26. Social Security and Medicare Spending as a Percent
                             of GDP

                                                     2004                2030
 Social Security                                    4.33%               6.31%
 Medicare                                           1.50%               2.64%
 Social Security and Medicare, combined             5.83%               8.95%

Source: 2004 OASDI trustees' report.

Financial Status of Social Security Trust Funds
      The Social Security trust funds currently bring in much more revenue than what
is needed for benefit obligations and have accumulated large balances. However, in
the near future payroll tax revenue will no longer be sufficient for expected spending,
and the trust funds are projected to be no longer solvent by 2042. Table 27 and
Figure 6 illustrate the magnitude of the projected revenue shortfall and how quickly
trust fund balances will erode.
                                          CRS-26

             Figure 6. Balance of the Social Security Trust Funds

               Balance of the OAS DI Funds, in Billions
   $7,000

   $6,000

   $5,000

   $4,000

   $3,000

   $2,000

   $1,000

      $0
            2004 2007 2010 2013 2016 2019 2022 2025 2028 2031 2034 2037 2040




Source: Chart prepared by Congressional Research Service (CRS) from data obtained from 2004
OASDI Trustees' report.

  Table 27. Various Performance Measures of the Trust Funds

                                                                        Balance of trust
   CY                        Income                       Outgo       funds (end of year)
                            (intermediate forecast, $ in billions)
  2005                                          $701        $518                     $1,867
  2010                                           930          670                     3,030
  2015                                         1,215          927                     4,442
  2020                                         1,539       1.299                      5,776
  2025                                          1,876       1,782                     6,575
  2030                                          2,223       2,364                     6,370
  2035                                          2,572       3,032                     4,736
  2040                                          2,919       3,778                     1,280

 Estimated peak of trust funds' balances:                 $6.6 trillion in 2027

 Estimated year of insolvency (intermediate forecast):
 Old-Age and Survivors Insurance Trust Fund                                   2044
 Disability Insurance Trust Fund                                              2029
 Combined                                                                     2042

Source: 2004 OASDI trustees' report.
                                           CRS-27

                       Administrative Information
Offices, Employees, and Administrative Costs
      The Social Security Administration has an extensive nationwide network of
local field offices, regional offices, and headquarters for policy and research. SSA
has a large customer service network, and of all federal agencies, its 800-telephone
line and internet website are among the most heavily used.

     Table 28. Administrative Structure and Customer Service
                        Contacts for SSA

                Location of SSA headquarters:                        Baltimore, Maryland
 Number of:*       Regional offices                                                        10
                   Field offices                                                        1,336
                   Hearings offices                                           138 permanent
                   Teleservice centers                                                   36
                   Program service centers                                                7
                   Data operations centers                                                1
 Number of SSA employees: (FY2004 full-time equivalents)                               63,701
 Administrative costs of Social Security:**                                       $4.3 billion
 Administrative costs as percent of benefit costs:**                                    0.9%

Source: Social Security Administration's Accountability Report for Fiscal Year 2004.

** Data for FY2003 from the 2004 OASDI trustees' report.
                                    CRS-28

                                References
Sources for Information in this Document
800 Telephone Number for SSA: 800-772-1213.

SSA Internet website at [http://www.ssa.gov].

Commissioner of Social Security, Jo Anne B. Barnhart, Altmeyer Building, 6401
Security Blvd., Baltimore, MD 21235.

U.S. Social Security Administration. 2004 annual reports of the boards of trustees
     of the old age, survivors, and disability insurance, hospital insurance, and
     supplementary medical insurance trust funds. Washington, 2004.

    Annual Statistical Supplement to the Social Security Bulletin, 2003.

    Unpublished data from the Social Security Administration, Office of Research
    and Statistics.

Other References for Program Descriptions
Myers, Robert J. Social Security. 4th ed. Philadelphia, University of Pennsylvania
    Press, 1993.

U.S. Congress. House. Committee on Ways and Means. 2000 Green Book:
    Background Material and Data on Programs Within the Jurisdiction of the
    Committee on Ways and Means. Washington, GPO, 2000. 1,575 p. (106th
    Cong., 2nd session. WMCP 106-14)

Benefit Facts
CRS Report 94-803, Social Security: The Cost-of-Living Adjustment in January
   2006, by Gary Sidor.
CRS Report 98-789, Social Security Earnings Test: Proposed Changes, by Debra
   Whitman.
CRS Report 94-622, Social Security: Raising the Retirement Age: Background and
   Issues, by Geoffrey Kollmann.
CRS Report RL32453, Social Security: The Government Pension Offset, by Laura
   Haltzel.
CRS Report 98-35, Social Security: The Windfall Elimination Provision, by Laura
   Haltzel.

Tax Facts
CRS Report 94-28, Social Security and Medicare Taxes and Premiums: A Fact
    Sheet, by Dawn Nuschler.
CRS Report RL32552, Social Security: Calculation and History of Taxing Benefits,
by Christine Scott.
                                   CRS-29

CRS Report RL33028, Social Security: The Trust Fund, by Christine Scott.

Economic Facts
CRS Report 95-543, The Financial Outlook for Social Security and Medicare, by
   Dawn Nuschler.
CRS Issue Brief IB98048, Social Security Reform, by Dawn Nuschler.
CRS Report 97-77, Social Security: Long-Range Projections, by Dawn Nuschler.
CRS Report 95-206, Social Security's Treatment Under the Federal Budget: A
   Summary, by Dawn Nuschler

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For other versions of this document, see http://wikileaks.org/wiki/CRS-94-27